Gemini and its founders, the Winklevoss twins, have been sued by investors contending that the exchange sold interest-bearing accounts that it did not register as securities. Specifically, investors pointed fingers at the company and its founders for fraud and violations of the Exchange Act. The proposed class-action complaint was filed on Tuesday in Manhattan’s federal court.
The Nuances Of the Lawsuit Against Gemini
Initially, Gemini Trust Earn products attracted investors by offering them upto 8% in interest on their assets. In the investment program, Gemini partnered with accredited third-party borrowers to deliver yield, generated through interest payments on loaned assets.
In mid-November, however, Tyler and Cameron Winklevoss abruptly halted redemptions after its partner Genesis Global became victim to FTX’s collapse.
The investors said in the complaint that the exchange, “refused to honor any further investor redemptions, effectively wiping out all investors who still had holdings in the program.”
Contrastingly, if the products were registered, the investors noted that they would’ve received disclosures to help them better navigate.
On December 23, the exchange said that it is working with Genesis and DCG and operating with the “utmost urgency.” It assured that all parties remain engaged and collaborative. In fact, they continued to work through the holidays to attain a solution. A December 27 note on its website read,
“We expect a more fulsome update by the end of this week.“
This is not the first time the exchange is in legal trouble. Back in June, it was drowning in legal waters. Notably, the CFTC sued Gemini for its Bitcoin Futures. The Winklevoss Twins-led crypto exchange was trying to roll out United States’ first Bitcoin futures contract back in 2017. Years later, the regulator alleged that the exchange presented misleading information during its bid to launch the product.
Leaving that aside, the exchange has been quickly expanding its reigns of late. Towards the end of last month, it expanded its operations to Italy and Greece. Prior to that in October, Gemini veered into Ireland with a VASP registration.